We are building a new product that reflects the priorities of a company executive

Therefore, customers will like our new product

It’s a clear violation of the First Law of Product: Customers decide what products they like, not companies.

Inside-out thinking is a situation where the wrong reasons are applied to decide which products are to be developed:

That market is so big, let’s build something for it

My intuition says this is the next big thing

This new product will position our company for what is important to us

Those reasons are actually not entirely out of the question for success either. The things that define truly inside-out thinking are (i) an impulse guided by a “we need” , not a “the customer needs” mentality; and (ii) skipping customer validation or ignoring troubling feedback from customers during validation. When you see those two dynamics at play, you’ve left the realm of sophisticated decision-making. You’re in the land of gambling with shareholders’ money. Sure, some inside-out products will succeed. But that’s analogous to saying that some lottery ticket holders win too. It’s a sucker’s bet.

Inside-out thinking is a pervasive thing. I came across this table in Gerry McGovern’s book, The Stranger’s Long Neck. McGovern surveyed SMB users of a website Microsoft runs – Pinpoint – that helps find IT solutions built on Microsoft technologies. The SMBs were asked what their top tasks were when they visited Pinpoint. McGovern then did something interesting: he asked the Microsoft team what they thought users’ top tasks were.

The table below outlines the results:

Customer

Microsoft

Internet security

Customer relationship management

Backup and recovery

Internet marketing

Security

Network management

Desktop support

Sales/lead generation

Data/document management

Billing

That’s a stark difference between what users value and what Microsoft thought they did. Or perhaps what Microsoft wished users valued. As McGovern notes, “And just like every other organization on the planet, what Microsoft wants is not always what the customer wants.”

This isn’t to pick on Microsoft; it really is the case at companies everywhere. Microsoft just happens to have been open enough to share their own experience here.

You can recognize it when it happens. Here are the Top 3 signs of inside-out thinking:

The spreadsheet says it will be big!

I don’t need customer validation, they don’t know what they want anyway

The Board/CEO/other senior executive is pressuring us to do this

Inside-out thinking is poor decision-making, it’s a bet with terrible odds, and wastes resources. Tough to understand how we can be so methodical with other operations in the organization and still go seat-of-the-pants in this area.

Update: I hadn’t seen his tweet at the time I published this post, but Box founder/CEO Aaron Levie offers another consequence of inside-out thinking here:

The easiest software incumbent to disrupt is the one prioritizing the needs of its strategy over the needs of its customer.

For 2010, three themes will impact the sector. These aren’t the only ones, but I expect to see plenty of news, features and industry mental energy covering these.

#1: Impact of SharePoint 2010

It’s coming. SharePoint 2010. Microsoft’s upcoming release for the enterprise received good attention during the SharePoint Conference in Las Vegas. Features include:

Social profiles

An actual wiki

Blogs

Activity streams

Status updates

Presence status

Social bookmarking

Tags

Ratings

As a list of capabilities, this certainly is impressive and quite a departure from SharePoint 2007’s social software efforts. The devil is in the details, of course.

But generally, customers who have been “making do” with 2007 will suddenly have an attractive option from Microsoft. SharePoint 2010 will likely be a big catalyst for Enterprise 2.0 growth.

The coming release of SharePoint 2010 is forcing many vendors to evaluate their positions in the market. Going head-to-head with the same or fewer features is going to be tough. What differentiates your offering? My Jaws picture refers to this dynamic facing Enterprise 2.0 vendors.

There will be articles reviewing 2010. There will be blog posts dismissing its capabilities or lack thereof. But there will be impact in the corporate world.

#2: Enterprise 2.0 Becomes “Like Air”

At Defrag 2008, I caught Charlene Li’s presentation, where she said, “social networks will be like air“. The premise of her talk is that social network aspects will become less a destination URL and more an integrated part of experience throughout the web and mobile.

This is a clear sign that the enterprise software and social software worlds are munging. Get ready to see a lot more.

Salesforce and Tibco won’t be the last. Expect more announcements in this vein for 2010. Mike Gotta noted that this concept was called “contextual collaboration”, and was promoted by Matt Cain in the late 1990s. The web 2.0 tools of today are better, more diverse, more scalable and better adapted to human behaviors than whatever was available a decade ago.

Putting these tools in-the-flow will be a powerful basis for expanding Enterprise 2.0’s reach. A challenge for standalone general tools of today is that they require employees to toggle between different apps. This can make it tough to get traction. For example, Intellipedia has been making a difference, but it’s still just “a marginal revolution“. Not all agencies have made it part of daily work.

In the European Oracle Enterprise 2.0 Group on LinkedIn, Oracle’s VP of Enterprise 2.0 for EMEA asked this question:

What the article doesn’t cover and where I would be interested in your views is how the use of E2.0 tools would enable the Business Processes themselves to be changed. Or innovated completely. eg how do you bring Crowdsourcing, Idea Engines, Prediction Markets etc and integrate those into ERP systems?

Yes, even Oracle is discussing this concept. Watch how this theme unfolds in 2010.

#3: Enterprise 2.0 Market Stratifies

I see the Enterprise 2.0 market splitting into these two models:

General collaboration suites that replace intranets and portals

Specialized applications that deliver tangible value around a specific activity

Watching the progression of general collaboration suite vendors, I’ve always believed their ultimate goal is to replace existing 1.0 intranets and portals. After all, once an Enterprise 2.0 vendor’s solution…

has the ability to store and organize files,

provides pages for company-wide and team-specific communications,

offers powerful search capabilities,

includes APIs for third party integration,

can be organized into multiple spaces, and

has a superset of the elements of the corporate directory,

…why would a company maintain both the intranet and the social software suite. Pick one. The Enterprise 2.0 vendors still need to mature their product further to become the company intranet/portal. But I see that as their destination.

Meanwhile, a new crop of vendors have dispensed with the pursuit of all-everything suite approach. Rather, they build applications that integrate social in solving specific problems (e.g. Spigit for innovation management). Gartner analyst Anthony Bradley tabs these vendors’ offerings as “activity-specific social applications”. These vendors build in functionality that solves specific problems for companies, usually with definable ROI.

I expect the general collaboration suite vendors will offer their own specialized modules as well, in order to offer tangible ROI solutions to their customers.

Watch how this stratification dynamic plays out in 2010.

Those are my thoughts – what do you think?

What the article doesn’t cover and where I would be interested in your views is how the use of E2.0 tools would enable the Business Processes themselves to be changed. Or innovated completely. eg how do you bring Crowdsourcing, Idea Engines, Prediction Markets etc and integrate those into ERP systems?

Fast forward to the past couple weeks. Both Microsoft Bing and Google announced deals to provide tweets in search results. Let me say that again: Google and Bing will be providing tweet search results!

Bing’s version is the first out the gate. In light of the earlier brouhaha, this may come across as insensitive…but I have to ask:

How should tweets be ranked in Bing and Google search results?

I hope your answer isn’t, “I wouldn’t.” Because that’s contrary to what made Google such a global powerhouse used by billions every year. And why Microsoft is working hard to increase Bing’s market share. Google and Bing built their business by presenting search results based on the authority of websites. This system of authority (e.g. PageRank) makes the results relevant to users.

So what about running searches for tweets? Should their presentation be utterly devoid of any authority ranking? Does it make sense to just show the latest tweet containing a given term? After all, that would simply be imitating what Summize (aka Twitter Search) does.

First, a good question to ask is, why do people want to search tweets? How does this differ from web search?

Why Are You Searching Tweets?

To my mind, there are three use cases where people will search for tweets rather than search for websites:

Find people

Find latest on a subject that won’t show up in search engines yet (lack of indexing, lack of authority)

Jump into conversations on something

Find people: You’re interested in a topic, and want to find others who can either improve your knowledge on it or with whom you want to connect. This is using Twitter as people search. The model for all of here is, you are what you tweet. It’s what makes you findable to others.

In this case, my sense is that people will have an desire to find those who would have the most authority on a given topic.

Find latest on a subject: The appearance of an article or blog post in the search engines can take a while. That contributes to the challenge of finding the latest. But the more pressing issue is the display of new articles in the search results. A good article or post on a subject, such as Enterprise 2.0, is likely not going to be ranked very high in the Google or Bing search results. No one links to the article yet, and it competes against a bunch of other incumbent articles in the search indexes.

If something shows up on the third page of Google’s search results, does it really exist?

This issue is even more pernicious for current events. The San Francisco Bay Bridge has been closed for several days now. It seems every estimate about when it will reopen has been wrong, meaning we all have to scramble to figure out our commute for the next day. To get the latest on the Bay Bridge, I searched Google, including the aggregate news results. Everything was too old when I did that, reflecting previous pronouncements. I needed what people knew right now. I went to Twitter, and found tweets that told me the latest status. Very helpful.

To find the latest on topics, I think there is a role for leveraging some sort of authority. People who have established credibility can be good first filters on what’s relevant and useful. For Enterprise 2.0, what is Dion Hinchliffe tweeting? For the Bay Bridge, I most trusted the KTVU tweet I saw.

Jump into conversations: This is Twitter as water cooler. You know something is going on. But how do you connect with people? Searches are good for this. Hash tags for conferences or big stories. Take the recent fraudulent #balloonboy story. It definitely captivated everyone. But even now, you’ll see tweets like this:

What is that? That’s someone taking a popular hash tag and polluting the search stream with spam. Again, a case where adding some authority to the tweet search rankings will help.

Tweet Authority Criteria

Keep in mind that “authority” is used in the context of Google and Bing searches. Of course web searches miss many authorities on subjects, but they work pretty well for giving relevant information.

I categorize the bases of authority in three buckets:

Relevancy of tweet stream to a subject

Crowdsourced signals of authority

Effectiveness in providing relevant content

As a point of reference, Bing’s initial measure of relevance was reported to be the number of followers a person has. Let’s look at the three categories of authority.

Relevancy of Tweet Stream to a Subject

The first basis for authority should be…does someone tend to post about a given topic? Frequency of posts are a good marker that a person has something of interest to share. If someone is going to be deemed an authority on a subject, I’d expect a fair number of tweets related to it.

One twist that would make this better. A semantic basis for linking terms. For example, if some one searches on Foo Fighters, consider people whose tweet streams include posts about “music” frequently as having higher authority.

Crowdsourced Signals of Authority

What does the crowd think of a given person or tweet? Let’s start with a single tweet. If someone posts something on a given topic, and it gets retweeted a lot, that should count hugely in terms of its authority for a given topic.

OK, now for the general stats. How many followers does someone have? Yes, it’s getting gamed. So the presence of a high number of followers isn’t an automatic definition for authority. But it does have relevance in constructing authority.

The benefit of computing this for users is that the authority of those who follow a person can be an input into his or her own authority.

Next… Twitter Lists. Number of followers is not the end of the story. Lists have two characteristics that can be used to compute authority. First is the number of Lists one is on. Tim O’Reilly is on over 2,500 Lists. No surprise – he really made ‘web 2.0′ ubiquitous in our culture.

But an even better indicator of authority is embedded in Lists. How does the crowd characterize a person? Those Lists are valuable for granting higher authority for a given topic.

Effectiveness in Providing Relevant Content

When someone tweets, how do people react? Robert Scoble has a good take from his blog post:

Number of retweets of that tweet

Number of favorites of that tweet

Number of inbound links to that tweet

Number of clicks on an item in Twitter search

I particularly like that #4 item – number of clicks. Once these tweets are in the Google and Bing search results, the clicks can be measured. These are powerful bases for measuring someone’s authority.

I’d add a measure for how often a shared link is clicked; say bit.ly’s click information. While the actual number of clicks tracked by bit.ly is wrong, let’s assume it’s wrong in a similar fashion for everyone. So the bit.ly clicks counts can give a measure of relative effectiveness in providing content.

What Do You Think?

That’s my somewhat exhaustive description of inputs for ranking tweets in Google and Bing search results. There’s more that would be needed. I can think of incorporating some element of time decay in how tweets are presented as well. But this post is long enough.

What do you think? How would you rank tweets in the big search engines?

A classic dilemma for companies is determining the best way to foster innovation. There are many good books with different approaches. Clayton Christensen’s Innovator’s Dilemma has influenced a generation’s thinking about innovation. He focuses management and entrepreneurs’ attention on the Big I: disruptive innovation.

One outcome of the popularity of Christensen’s book is the awareness people have that entrenched business practices can inhibit companies’ ability to recognize and address discontinuous innovations from new market entrants. Motorola, for example, is often held up as an example of this. The company continued to develop only analog cell phones even as the digital phones were getting traction. In clinging to analog, which it dominated, it fell far behind in the mobile phone market.

A key practice espoused by Christensen is for companies to tackle discontinuous innovations by creating separate divisions. These divisions have an R&D profile, meaning they are funded without requiring a financial return. They do not have to prove themselves to sales or other parts of the organization. This gives them the room they need to figure out how to approach the impending market shift.

The issue with the popularization of this framework is that it sets up a binary approach to innovation. You’re either addressing disruptive or discontinuous innovations, or you’re executing on yesterday’s business. It’s this dichotomy that obscures the value of innovations that move organizations forward, competing to increase market share and profits.

To that end, let’s examine two ways companies create work structures for innovation.

Integrated or Separate Innovation

The graphic below highlight two very different ways to approach innovation. And that’s a good thing.

Separate Division: As advised by Clayton Christensen, this approach is best for companies that need to address disruptive innovations. And all companies need to address disruptive innovations.These days, it’s not a matter of if, but when. For fundamental market shifts, too much is invested in the current operations for companies to address changes. Freeing a group of people from these constraints is critical, if the corporate culture is not open to big-bet innovations.

A couple examples of interest here. First, let’s go back to Motorola. Yes, the company muffed it badly on the transition from analog to digital. But there was something that it did right years before. Motorola researcher Jim Mikulski could see in the 1960s that existing cellular technology was insufficient for the emerging uses of the mobile technology. He had a new technology to replace it, and asked the head of Motorola’s communications division, John Mitchell to fund its development. Mitchell said “no”,

Arguing that 400MHz technology offered sufficient capacity and met consumer needs. The Communications Division current product line was the market leader, and a new product, which would likely cannibalize the current system, was deemed to be both unnecessary and potentially harmful to this business line.

So Mikulski found refuge in Motorola’s Corporate Research Laboratory. He worked on the new technology there, receiving funding for its development. When his view of the coming changes proved to be true, Motorola was ready with its new technology.

In other words, he addressed innovation that affected the communications division in a completely separate division.

Microsoft, on the other hand, has programmatically set up a separate division for innovation. The Microsoft Research group works on ideas that may never have commercial appeal. But some of their work has resulted in product features and direction for its new Natal gaming system, its Bing search engine, and an upcoming release of Outlook email.

They have a separate division, but the innovations arguably are of the sustaining variety, not disruptive.

Integrated into Daily Work: In this work structure, everyone is involved in innovation. The company sets expectations, and encourages employees’ to share ideas. Done right, this is in-the-flow stuff. Employees are encountering issues to be addressed daily, and they’re hearing new customer feedback all the time. They are well-positioned to come up with innovative solutions and products, if senior management makes that a priority.

Whirlpool is a good example of this. In 1999, then-CEO David R. Whitwam made the determination that Whirlpool needed to stop competing on price, and make innovation its central strategy. Fast forward to today, and the results have been stellar. Whirlpool has escaped competing as a commodity vendor, with $4 billion in revenue (21% of total sales) generated from its innovation efforts. Are they satisfied? No. CEO Jeff Fettig stated that while participation in innovation from 5,000 employees is good, he’s looking to increase it to 15,000.

That’s integrating innovation into employees’ daily work for sustaining innovation. In this case, sustaining innovation has been the source of growth and profits.

Another company where innovation is part of everyday work is 3M. The company is legendary for its innovation. And clearly, the encouragement of all employees to be part of innovation has taken hold. For instance, there was this story recently in Fast Company:

3M told a great innovation story at the ARF annual conference about a new product that started with a complaint call into customer care. The representative did his own research online, came up with a solution, filmed a video that he put on YouTube and re-contacted the customer to see if that is what he was looking for.

The sheer volume of ideas that employees have to improve companies’ existing businesses puts a premium on crowdsourcing ideas. And inevitably, some of that culture and the ideas emerging from sustaining innovation will relate to discontinuous or disruptive innovations.

Why Not Do Both?

Google is a good example of a company that does both. It’s 20% time for employees to devote to innovation is the stuff of business legend. And according to the company, half of its new products result from this employee time.

But then look at Google Wave. This project was done beyond 20% time. It was actually a completely separate project developed by a 5-person “startup” team in Australia, far from the company’s Mountain View, CA headquarters. Google Wave is transformative, and will likely usher new design principles into a host of software applications.

Google is a good example of an innovation-led company. They mix the elite unit approach to innovation with the everyday encouragement for employees to innovate.

There’s not this dichotomy of “all disruptive/discontinuous innovation, or you’re just falling behind”. Rather, it’s a smart blend of the strategies.